Mar 28 2007
Daily Forex Analysis
Daily Forex Analysis
USD
The US Consumer Confidence came in at 107.2, falling short of consensus expectations of 109. February’s Consumer Confidence was also downwardly revised to 11.3 from an initially reported 112.5 reading. As expected, consumers’ concerns regarding the weakness in the housing sector were among the major reasons for this report’s decline. March’s report continues showing a strong divergence between the present situation component and the expectations component, and while the present situation component peaked to an almost 6 year high of 137.6, the expectations component fell from 93.8 to 56.9, its lowest level in 8 months.
The lower than expected consumer confidence, along with a weaker than expected Richmond Fed survey that came at -10 on expectations of -4, suggests that the Federal Reserve wont be able to hold the current interest rate level for too long. Following the report, the USD weakened against all major counterparts, reflecting traders renewed expectations for a rate cut later this year.
Today’s calendar gears up and brings us the Durable Goods data, which is expected increase 3% MoM and 1.8% ex-autos. Yesterday’s market reaction was lacking the momentum required for the EUR and the GBP to hit 1.34 and 1.97, respectively. Should today’s data also fall short of expectations, there is a strong probability that the USD will continue to sell off and retest the 1.34 and 1.97 levels.
EUR
The German IFO Business Climate unexpectedly rose 1.2 pts to 107.7, while the expectations index rose 1 pt to 103.2. This has provided the EUR with some back wind to climb higher against its counterparts, but evidently not enough to hold it there. During the sessions that followed, the EUR tried basing above the 1.3330 level, but it seems any appreciation will not occur before the US market opens and the US data releases, since most EUR data for the day has already been released- most important of which was the M3 Money Supply which have increased 10% YoY. A higher Money Supply means inflationary pressures continue increasing, leaving the European Central Bank with a good enough reason to stick to there hawkish rhetoric.
EUR’s price action today is very much dependant on the news scheduled for release elsewhere and the way its counterparts react to these events. Although the EURUSD 1.34 level seems hard to reconquer, a weak US data might send the pair to retest this level.
JPY
The JPY is showing some signs of recovery as inflation expectations in Japan rose after the BoJ governor Fukui provided the Diet’s Upper House committee on financial issues his opinion regarding the prospects of inflation this year. The BoJ governor expects prices to remain at their current level for the upcoming months and then rise during the second half of the year. The data scheduled for release during the upcoming days from Japan will surely help the markets in shaping those expectations, and incase these indeed increase, the JPY has a lot more room to appreciate.
Courtesy of Forexyard
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